LNG Infrastructure & Development K.K. Sinha Director Essar s Ltd.
Gas in Global Energy Basket (2016) Million tonnes oil Equ. Gas Consumption (Domestic v/s Trade) Trade Distribution (Pipeline V/s LNG) 592, 5% 910, 7% 420, 3% 3732, 28% 4418, 33% 3204, 24% 1083, 31% 2460, 69% 346, 32% 737, 68% Oil Coal Hydro Electric Total: 13.3 Billion TOE Natural Gas Nuclear Energy Renewables Source: BP Statistical Review of World energy Total: 3,543 BCM Gas Domestic Consumption Gas Trade Chabahar Total: 1,083 BCM Gas Pipeline Trade LNG Trade Natural gas contributes 24% in world Energy basket Natural gas contribution is third behind oil (33%) and coal (28%) Being cleanest among top three, natural gas is expected to further enhance its share More than two third of gas is consumed domestically. Approx. one third is traded in the form of gas through pipelines and in the form of LNG through ships Approx. two third of gas is traded through Hazira pipeline primarily within Europe and North America Approx. one third of gas is traded in the form of LNG primarily to Japan, Korea, China, India, Taiwan etc. 2
Global - Liquefaction and Regasification Infrastructure Liquefaction Quantity in MMT Regasification Quantity in MMT 400 350 340 900 800 795 300 250 200 150 100 258 700 600 500 400 300 200 258 50 100 0 Capacity Demand 0 Capacity Demand Proposed Liquefaction Quantity in MMT 500 450 452 Capacity utilization of liquefaction plant is 75% 400 350 300 340 Additional 112 MMT (35% increase) is expected to be added by 2022 250 200 150 100 Regasification capacity utilization is approx. 35% USA has regasification capacity of 129 MMTPA and utilization is 1% 50 0 2016 2022 90 MMT of new Regasification capacity is under construction Source: IGU 2017 World LNG Report
Gas in India Overview 2016 - MillionTonnes Oil Equivalent in India 9, 1% 29, 4% 17, 2% 45, 6% 213, 30% 412, 57% M M S C M D 160 140 120 100 80 60 40 Sector Wise Natural Gas Demand 136 142 126 127 19 121 17 10 10 11 14 14 15 19 13 7 7 7 10 7 20 20 21 19 23 31 32 32 28 30 Others (Others/LPG/PL consumption) Refinery Petrochemicals CGD Power 20 44 42 45 45 40 Fertilisers Total: 725 Million TOE Oil Coal Gas Nuclear Hydro Renewable Source: BP Statistical Review of World energy June 2017 0 FY14 FY15 FY16 FY 17 FY 18 Source: Crisil Natural gas contributes 6% in India Fertilizer, power, refinery, city gas and Energy basket while coal and oil petrochemicals are the major user of gas contributes 57% and 30% respectively. in India With focus on clean energy, gas share is Gas demand has increased by 8.5% in expected to increase substantially FY 17 and 4% in first nine months of FY 18. Although latent demand is huge, India is yet to reach the inflexion point of the faster growth.
Demand and Supply of Natural Gas in India LNG Consumption M M S C M D 160 140 120 100 80 60 40 142 138 121 127 71 48 58 68 73 69 70 71 LNG Domestic During last 3 years Natural gas demand has increased from 121 MMSCMD in FY 15 to 142 MMSCMD in FY 18 Domestic production has been stagnant around 70 MMSCMD Natural gas import has increased from 48 MMSCMD in FY 15 to 71 MMSCMD in FY 20 18 0 FY15 FY16 FY17 FY 18 Source: Crisil 5
Price sensitivity of LNG LNG prices have declined during FY 16 and FY17 with increase in the liquefaction capacity and decrease in price of crude oil However, during last few months, price has strengthened due to rise in crude prices Currently LNG price is at approx. USD 10/MMBTU which is quite high Currently LNG and Fuel oil are trading at similar prices and only benefit for LNG are benefits associated with the cleaner fuel Chabahar Hazira 6
Traditional LNG Termimal Huge investment and long term commitment from full value chain Chabahar Land based terminal with huge investment of ~ USD 700 800 Million Tie up of full value chain Liquefaction capacity, ships and end user Beneficial for large scale operations to cater to market size 5 MTPA or more Important for sectors with fixed demands and capability of long term commitments Worldwide, 106 land based LNG terminals are operational Hazira 7
New Concept FSRU and FSU + Land based Regas Floating Storage and Regasification (FSRU) Floating Storage Unit (FSU) and Land based Regasification LNG ship is used as storage unit instead of development of large tanks on land Regasification unit is on ship in FSRU and on land in case of FSU Capex is lower than land based terminal ( ~ USD 400 600 Million) for FSRU and USD 200-300 million for FSU + land based regas Better option compared to land based terminal if demand is not very high up to 3-4 MMTPA Breakeven at lower traffic of 1.0 to 2.0 MMTPA Long term commitment for full value chain is not required beyond the anchor customer Worldwide, 26 FSRU and one FSU based LNG terminals are operational at present
LNG Regasification infrastructure in India Existing Regasification Terminals Location Ownership Stake Existing Capacity (MTPA) Incremen tal Capacity (MTPA) Utilisat ion Dahej Petronet LNG 100% 15 2.5 97% Shell Gas B.V. 74% Hazira 5 76% Total 26% GAIL 25.5% Dabhol NTPC 25.5% MSEB and Financial institutions 49.0% 5 (1.6 due to lack of breakwater 56.3% Kochi Petronet LNG 100% 5 ~ 5 % Total 26.6 2.5 Upcoming Regasification Terminals Location Ownership Capacity in Phases I Expected Commissioning Mundra GSPC and Adani 5 2018 Ennore IOCL 5 2018 Chhara HPCL and Shapoorji Pallonji Group 5 2021 Dhamra Adani, GAIL and IOCL 5 2021 Jafrabad Swan Energy 5 2020 Hazira Ultra LNG Limited and Essar Bulk Terminal 4 2020 Total 29 Currently, India has approx. 27 MTPA of Chabahar regasification capacity from Petronet Dahej, Petronet Kochi, RGPPL Dabhol & Shell Total Hazira import terminals Approximately 30 MMT LNG Hazira regasification terminal is under development in India 4 terminals are on land based Ennore, Mundra, Dhamra and Chhara One FSRU Jafrabad One FSU + Land based at Hazira 9
Hub Spoke Model and Small Scale LNG Pipeline connectivity to all the demand centers is going to be a challenge Several small capacity LNG terminals might be a better solution compared to few large terminals Hub and Spoke model can be implemented where one large terminal will cater to a large demand center and also provide transshipment facility for few smaller terminals. Bangladesh and Sri Lanka market can also be captured through hub and spoke model Road movement of LNG for smaller distance will be another source of transportation of LNG
LNG as auto fuel and bunker potential demand centre With tighter emission rules for the maritime sector from 1st January 2020, potential to use LNG as bunker fuel is increasing. Antwerp, Amsterdam, Rotterdam, Zeebrugge and Stockholm ports already have LNG bunkering infrastructure. LNG can be bunkered at several Norwegian ports. LNG prices are almost same as that of fuel oil hence shifting into LNG will not lead to additional fuel cost, however, ship engines need to be modified LNG is better than CNG due to its higher density hence larger quantity can be stored in the automobile fuel tanks LNG and solar powered vehicles are solution for the future transportation as they are cleaner compared to other fossil fuels India consumed 76 MMT of diesel during 2016-17 Demand of diesel has increased at CAGR of 3.3% during last 5 years Assuming similar trend in future diesel demand is expected to be 90 MMT by FY 2022 If 25% of diesel in FY 2022 is replaced by LNG, LNG demand will increase by 22 MMT which is higher than the current import of LNG in the country.
LNG as Auto Fuel Infrastructure Required Due to cryogenic state, LNG cannot be moved through pipelines for longer distance LNG movement will require separate infrastructure in terms of LNG depot and LNG filling stations For economical movement of LNG to the depots, LNG can be moved by railway through pressurized double walled tanks LNG can also be moved by LNG semi trailer and LNG iso-containers
LNG Financing Important factors for financing of LNG Infrastructure: Long term take or pay contracts with customers providing revenue visibility and stable cash flows resulting in financial viability of the project Lower LNG prices are critical for financing of LNG projects Indian market is highly price sensitive Many industries like power cannot afford high LNG prices as they have to compete with alternate sources of energy like coal, solar etc. Chabahar Lower cost and longer duration loan are critical for sustenance of LNG infrastructure projects Procurement of equipment from established vendors with past track record to ensure quality and reliability of the LNG infrastructure Hazira 13